There has been a discussion – or a debate if you like – about Somalia's economy without a state. Some interesting studies about Somalia’s economy since the fall of Siad Barre’s regime show that Somalia's economy is better off with the absence of predatory government. What does that mean though? Does it mean that Somalia doesn't need a government? And if does need a government, what kind of government?
Road to Anarchy
Somalia has been without an central government since Siad Barre’s regime was overthrown in 1990. Two regions in the north west and north east have setup regional governments, Somaliland and Puntland respectively. The region south of Galkayo city had no government or central authority for the last 15 years, but warlords and tribal chiefs filled the vacuum. Finally, the Islamic Courts Union chased away the warlords and are now in control of most of Southern Somalia.
There were numerous attempts by the international community to create a central government for Somali and so far, they’ve all failed (there’s now a weak government that seems to follow the footsteps of its predecessors).
Better Off Stateless
Somalis are better off under anarchy than they were under government argues Peter T. Leeson in his paper “Better off Stateless”. The reason for this development is “the absence of a predatory state” which limited the entrepreneurship of the Somali people for decades. Somalia’s economy today is all private business and ownership. Researchers from World Bank agree with this conclusion and add inventiveness as another factor for this trend. Tatiana Nenova and Tim Harford in the “Anarchy and Invention” discuss how private enterprise is succeeding without a government. Somali entrepreneurs are using “foreign jurisdictions or institutions to help with some tasks”, for example all hawala business are registered in Dubai. Somali business use “networks of trust to strengthen property rights” such as the Somali tribal system.
The hawala system (money transfer) is a the most important sector in Somalia. It started in the late 1980s in response to the governments restrictions on banking and foreign currency trade. But the massive growth came after when the only method a Somali can send money back home was through hawala. It’s a system that’s all based on trust, you don’t need address; just the name of the person, location and tribe are enough for him/her to receive the money the next day almost anywhere. Money sent through hawala to Somalia is estimated at $1 billion a year, I think it’s even more.
In a visit to Dubai where most hawala businesses are based, I saw first hand how ingenious these guys are, they use MSN Messenger for communication between representatives in different countries. Reps from around the world login to MSN Messenger and share information on exchange rates, follow up on transactions and so on. The actual transaction is also done through MSN Messenger by simply requesting a rep. to pay X amount of money to recipient Y and they sort the accounting later. hawala companies now provide an ever growing range of banking services and are investing in other sectors of the economy.
One advantage Somalis traders have is mobility, they don’t mind moving to wherever there’s business. I know a businessman who started his business in Kenya, later had a branch in Dubai for wholesale and another branch in Indonesia mainly for manufacturing. He told me he was considering to move to China because it’s cheaper. Other Somalis trade in real estate, textile, logistics, retail, telecomm and oil throughout Africa. In fact Somalia has one of the best telecomm in Africa.
Does Somalia Need a Government?
Somalis for most of its knows history – four thousand years or so - didn’t have a central government, instead they were organized around tribal sultanates and kingdoms. Islam came to Somalia peacefully so there’re no recorded conflicts with other muslim entities. Somali tribes however, united whenever they faced a common threat such as the Portuguese or the Ethiopians. The question is whether such a system is applicable today.In his book, the Law of the Somalis Michael van Notten describes the Somali tribal traditions, the customary law and how it replaced the role of the government in creating and maintaining stability. He argues that imported forms of government where people are divided into rulers and the ruled will only lead to anarchy in Somalia, the solution he say to cultivate the Somali customary law and economy. Indeed Somaliland, Puntland and Islamic Courts Union are all formed by different tribes and they’ve all created stability in their regions.
However, I take the view that Somalia needs a government, one that’s small and decentralized. The tribal system is important and its role has to be recognized and defined in the constitution (doesn’t have to be a major role). I think a government is required to provide and maintain public services such as health, education, resource management and the overall welfare of the citizens.
Somalis – especially the business community – seem to agree that a government is the solution to the Somali problem. In my assessment based on my conversation with Somalis, the overwhelming majority agree on the need for a government. There’s a feeling of instability among ordinary citizens even in places like Somaliland and Puntland.
I also think any future government have to be created by Somalis and adopted for the Somali situation. So far, the peace talks and the attempts to form a Somali government only resulted in weak governments, made up of people with dubious backgrounds (i.e. warlords and officials of Siad Barre’s regime). Also the political system(s) suggested doesn’t take into account the Somali culture and traditions. For example, in the last two governments, there was a President and a Prime Minister from Hawiye and Darood (one from each), the parliament was also divided on tribal basis. In the last two governments there was conflict between the two men (President & PM) so whoever bribed the parliament better got a vote of no confidence for the other (voting not based on tribes). On the other hand, you’ve the clan elders with tremendous influence – and power - in the society but aren’t recognized in the constitution. So you always end up with a deadlock situation and more often than not an increased likelihood of conflict.
Most of all, I’m fearful of the incompetence of those involved in politics in Somalia today. Three groups dominate the political scene; the warlords, corrupt former Siad Barre regime official and clan representatives. They’re all distrusted by the majority of the Somali people.